Common Good Iowa

Warning: Cliff ahead in Iowa

Posted on October 13, 2023 at 12:47 PM by Mike Owen

Iowa’s Revenue Estimating Conference confirmed Thursday what we’ve known for many months: Tax cuts reduce state revenue.

And that means trouble ahead for every service Iowans count on, to offer opportunity through education, to support working families, to keep our streets safe and our water clean, and to provide the quality-of-life assets that make Iowa an attractive place to live, work and raise a family.

Now, the governor and legislators, banking on a shortsighted tax-cuts-mean-votes strategy, don’t want you to make that connection. So they talk about current budget surpluses, which are temporary, and for good measure act as if it’s the tax cuts that caused them.

Common sense and math show they’re wrong.

Here are the relevant points to understand Iowa’s budget situation.

The REC projects a slight dip — 0.9% — in net revenues for the current fiscal year compared to the one that ended June 30. It projects a further cut — 1.8% — in the next year, for which legislators will build a budget after they return to Des Moines in January.

Thursday’s news prompted more obfuscation from the governor about what’s happening. Rather than attributing the surpluses to an economy that was beefed up by federal recovery support, she suggested it was all about tax cuts that have barely taken effect.

Recall the 2022 tax bill; it set up a phased reduction in tax rates from 2023 through 2026 that will leave Iowa with a 3.9% flat rate income tax. More importantly, recall the cost: $1.9 billion by FY 2028, when fully phased in, as estimated by the nonpartisan Legislative Services Agency. 

The REC report shows we’re about to see the first bites. As Department of Management director Kraig Paulsen said at Thursday’s meeting, these early reductions in revenue were “planned.”

That’s the plan: retrenchment and forced austerity. Tax cuts are designed specifically to cut revenue so we can’t do as much to meet our challenges and raise our vision.

Don’t let the politicians in charge distract you from this truth with talk of surpluses. Surpluses exist in spite of tax cuts, not because of them. We have a $2 billion surplus because we’ve held support of services below inflation while banking one-time revenues.

Because of the cuts already passed — and new ones they want to pass in 2024 — surpluses soon won’t exist. Neither will many services that you see or use every day.

The tax-cutters know Iowans can’t see it now because the cuts come over several years, the biggest cuts coming last. The services will go with them. Politicians won’t pay the price, at least in the near term. Neither will people who leave for more forward-thinking states. 

But Iowa residents most certainly will.

Categories: Budget & taxes

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